The US Securities and Exchange Commission has charged Time Warner and some of its executives with "materially overstating" online ad revenue and the number of its Internet subscribers, and with aiding and abetting securities fraud.

The company has agreed to pay a US$300 million civil penalty related to the charges. The company also agreed to restate historical financial results related to the alleged inflated numbers.

Separately, the SEC charged company CFO Wayne H. Pace, Controller James W. Barge and Deputy Controller Pascal Desroches with "causing violations of the reporting provisions of the federal securities laws." According to the SEC they consented, without admitting or denying the allegations, to a cease-and-desist order finding they caused reporting violations by the company "based on their roles in accounting for US$400 million paid to the company by Bertelsmann AG in two sets of transactions."

The SEC has been conducting a review of AOL's accounting practices. The inquiry started several years ago.

"Our complaint against AOL Time Warner details a wide array of wrongdoing, including fraudulent round-trip transactions to inflate online advertising revenues, fraudulent inflation of AOL subscriber numbers, misapplication of accounting principles relating to AOL Europe, and participation in frauds against the shareholders of three other companies," Stephen M. Cutler, director of the SEC's enforcement division said in a statement. "Some of the misconduct occurred while the ink on a prior commission cease-and-desist order was barely dry. Such an institutional failure calls for strong sanctions."